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3 Reasons to Start a Business Before the EU Referendum

by Startacus Admin

Chris Conway is the MD of Accounts and Legal, a leading small business accountancy firm in London. Here he tells us some reasons why now is a great time start a new business, despite the uncertainty created by the UK EU Membership Referendum.

Three reasons to start a company despite Brexit uncertainty

Companies are still registering at a record rate, despite several economic and political uncertainties on the horizon.

The latest data from Companies House showed there were 65,619 new company incorporations in April, this is up 75 percent from a year ago when many businesses were concerned about the outcome of the General Election.

But there is just as much uncertainty around now such as the prospect of an economic and political fallout from a Brexit at the EU referendum and a new US President to be elected.

So what is driving business growth?

How many companies were born in April?

There were 65,619 new company incorporations in April, slightly down from 66,095 in March, but up from 49,588 a year ago.

Meanwhile, the number of companies in liquidation rose from 84,661 in March to 86,156 in April.

The register now stands at 3.7million companies. Out of these 86,156 are in liquidation, up from 84,661 in March, while 158,549 are in the course of removal, although there are many reasons a company could be liquidated so this doesn’t necessarily mean they have closed down.

Between 1979 and 2016, incorporations have increased from 66,500 to 611,400 per year, and dissolutions from 25,700 to 410,900 per 12 months.

Over the same period, the number of incorporated companies has increased by more than 2.7 million

March and April usually signal peaks in the market, so it will be interesting to see the birth and death rate in future months as we get closer to the EU referendum.

There are still plenty of reasons why companies are still starting and incorporating amid the political and economic uncertainty.

Falling corporation tax

Operating as a company has become attractive in recent years and is set to become more so from falling corporation tax.

In recent Budget announcements, Chancellor George Osborne has announced decreases in Corporation Tax, currently 20 percent but falling to 17 percent by 2020.

This can make trading as a limited company more tax efficient than as a sole trader where you would be charged the higher rates of income tax.

Buy to let changes

Landlords have faced several threats to their buy-to-let portfolio from government crackdowns.

They now have to pay an extra 3 per cent stamp duty and from next year will see mortgage interest relief that they can claim on their tax bill scaled back.

However, one way around this that many are going for is setting up as a company as they will still be able to use the mortgage interest relief perk and they will also pay the lower corporation tax rate.

Jobs market

The introduction of the living wage and wider uncertainty has led to many employers slowing recruitment.

The latest data from the Office for National Statistics shows there were 745,000 job vacancies for February to April 2016. This was 18,000 fewer than for the three months to January 2016, the largest quarterly fall since April to June 2011.

As an alternative to finding a job, many may instead choose to harness their own skills and experience to go self-employed and set up as a limited company.

The number of self-employed increased by 182,000 to 4.69 million between January and March 2016.